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I EDFU WATER AND WASTEWATER PROJECT

INSTITUTIONAL DEVELOPMENT COMPONENT:

PRELIMINARY DESIGN REPORT- MAY 1991

Contents:

- Section 2.1 Institutional Development Issues and IWCs

- Section 7.5 Edfu Project: Institutional Development

- Section 8.5 Software Components: O&M

- Annex A. O&M Management Capability Survey: Edfu

Prepared by:

Simon Watt, Institutional Advisor

May 1991

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2.1 INSTITUTIONAL DEVELOPMENT ISSUES AND THE IWCs

2.1.1 Background to Institutional Development

The Edfu Water and Sewerage Project is a pilot capitalinvestment project,- the first Project in a 10 year Danidafinanced programme to assist in the improvement of socialinfrastructure and employment opportunities for the peopleof Aswan Governorate. The Project has the followingoutputs:

- extend and rehabilitate the water supply system ofEdfu Town and several villages in Edfu Markaz,

- construct a completely new sewerage system for Edfutown with treatment works in the desert.

Additional project components will cover primary healthcare throughout the Markaz, including demonstrationsanitary units.

If, however, the Edfu Project investments are to deliverthe planned benefits over their working life they must bemanaged, operated and maintained effectively by theinstitutions responsible for them. Capital investmentprojects to extend, upgrade or rehabilitate assets arerelatively easy to manage; projects to assist institutionalstrengthening to improver management capability arecomplex, time consuming, and difficult. Nevertheless theyare essential to ensure long term sustainability of theservice.

• Institutional development to make the best use of limitedhuman, material, and financial resources is currently amajor issue in Egypt. A number of water and wastewaterinstitutional strengthening programmes are beingimplemented to assist local government staff develop theirmanagement and functional skills, and re-appraise theirinternal structures and procedures.

Institutional development is not simple. It has clearpolitical dimensions with respect to national and regionalfinance generation and distribution. These issues arebriefly discussed as they provide a context for therecommended changes for the Edfu Project.

To be effective, action must be taken over a wide range ofagencies and on the administrative processes of localgovernment. Institutional development programmes have tobe undertaken with the active agreement and support of alllevels of Government. The administrative and politicalenvironment has a critical effect on the potential successo r failure. - - . . .

' :. :•" ~." "Y, ;. ••'."•': " . . . "' '•• ' • " '•' '';:- 'The sector objectives of institutdorial< development forwater and sanitation are to improve the effectiveness andperformance '• of- existing sector ^organisations; expand

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service coverage throughout the governorates; upgradeservice levels; improve cost recovery thereby reducingCentral Government subsidies; develop managementcapability; maximise potential health benefits at thelowest cost; implement GoE social policies in the sector.

The means to achieve these objectives include the internalstrengthening of existing functions of the water utilities,and the external re-structuring of the sector institutions:

- Immediate internal measures for the Edfu Project willinclude staff training; the introduction of improvedmanagement techniques (including financial managementand planning for O&M); personnel policies to improvestaff incentives and professionalism; implementingeffective O&M procedures.

- Longer term measures include the formation of anIndependent Water Company (IWC) at Aswan Governoratelevel; many of the immediate measures can only beimplemented within this wider context.

IWCs are semi-autonomous state owned enterprises that arelegally inter-related with many government agencies andadministrative units; these play an active role inmanagement and control of technical, financial, andadministrative functions of the IWCs. These relationships,although specified by law, are in practice still beingworked out and interpreted by IWC managers on the ground.

The central Government of Egypt (GoE) has recently statedits intention of promoting further the formation of semi-•autonomous water supply utilities in the Governorates, inaddition to the three existing IWCs at Kafr El Sheikh,Beheira, and Damietta.

Reasons for this current interest in IWC's include: thepossibility of decentralising responsibility for tariffdesign and increasing user water charges; more effectivelocal management; better selection and remuneration ofstaff . Decentral- ising decision making powers to theutility management level is a world wide trend and is thebasis of most performance improvement programmes

Since the Project commenced in February 1991 the Offices ofthe Governorate of Aswan have also declared their intentionof establishing the Water Supplies services in theGovernorate as an Independent Water Company (IWC). Thismove is fully supported by NOPWASD and the key Ministry ofFinance.

This simplifies the task of improving the internalmanagement structures and procedures of the Edfu Utility.But it also presents problems because of the longer timescale and Governorate wide geographic extent involved withIWC formation.


2.1.2 Edfu District Water Services

a./ Local Administration Structures

The basic geographic units of the Egyptian LocalAdministration system were defined under Law 42(1979).These units divide Egypt into a hierarchy of levels:

Governorates'(al-Muhafaza). There are 26 of these, withurban governorates being divided into urban quarters(al-Hay) and provincial governorates being divided intoDistricts. Aswan is classified as a Provincial Governorateand also as a Frontier Governorate because it is adjacentto Sudan to the south. In 1981 GoE established a regionaleconomic planning system for 8 governorates includingAswan.

There are at present twelve service ministries that havetheir field staff and budgets decentralised to theGovernorate level, including the Ministry of Housing &Public Utilities; they still receive technical support(planning etc) from their central ministries, but inadministrative terms are part of the governorate system.

Districts (al-Markaz). There are 163 Districts in Egypt;Aswan Governorate has 5 Districts. Each District contains acapital town (al-Madina) occupying a sub-District dividedup into an urban area and surrounding subvillages which areusually contiguous with the main town. The capital townsare both the administrative centre of the urban areas andof all the village units in the District. Districts may•contain more'than one large town.

Edfu is the capital town of Edfu District with 6subvillages, which are included in the Edfu infrastructureMaster Plans and also are part of the Project urbancomponent.

Village Units (Wahda al-Qarya). There are 906 village unitsthroughout the country; Aswan Governorate has 24 villagesof which Edfu District contains 8. The village unitsconsist of a mother village, which is the location of theLocal Administration offices, and a number of satellitevillages.

Each administrative unit at each level is administered byan appointed Executive Officer supported by localgovernment staff (Diwan) including staff directly workingfor the unit, and functional staff assigned by the variouscentral Ministries. These staff are directly responsiblefor the implementation of central Ministry policies andplans. At the Governorate level the Chief Executive Officeris called the "Governor"; the equivalent at the Districtand Village level is 'Chief.

There are two councils at each level:

a.-

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- a Local Popular Council elected every 4 years but made upmainly of government nominees. Their role is to approveplans and budgets;approve new utilities; impose local feesand duties; propose local taxes. In practice the PopularCouncils seldom have an independent voice.

- and an appointed Executive Council made up from Ministrystaff drawn from the central government functionalMinistries. Their functions are: budget preparation;suggest capital spending plans; develop administrativeplans; set regulations and performance standards for localservices; monitor projects and services.

In technical terms the Egyptian local administration systemoperates under a dual control principle, which gives thecentral Ministries significant technical and supervisorypowers and responsibilities over the staff assigned tolower levels (including career advancement),-whilst at thesame time Governors have been granted administrative andsome operational authority over these same staff.

In political terms the system tries to unify the policymaking functions of the key central Ministries with thewishes of the locally elected bodies which are intended torepresent the interests of the public. However the PopularCouncils generally are expected to endorse the plans andbudgets submitted to them.

b./ Edfu Municipality Water Supply.

Edfu -Town Water Supply is the responsibility of theEngineering Affairs Department under the direct supervisionof the Chief of the District. The service staff work withinthe framework of Edfu Municipality, not as a servicedepartment of MHPU.

This has important consequences in the effective managementof the service because O&M is budgeted and controlledthrough the Financial Affairs Department of the Districtand Governorate. Water service needs are therefore incompetition with other town services for scarce financialresources to finance O&M.

The organisational structure of Edfu's Water Service isshown in Fig 2.1. System operation is the responsibility ofthe Water Supply Manager, who plans and supervises the workof the following sections:

- Water Production, including the pump station on theNile

- Water Distribution, including the repair of thedistribution network; installation of new connectionsrepairs to the system etc.

A separate town department is responsible for water meter

CHIEF OF THE CITY

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ENGINEERING AFFAIRS

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GENERAL ACCOUNT

Accounting Manager 1Financial Controller 1Accountants 31

FINANCIAL AFFAIRS

Financial Manager 1StoresTreasureyRevenue

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ADMINISTRATIVE AFFAIRS

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readings, billing, and accounting. Revenues collected areconsolidated into District level accounts. Expenditures arealso consolidated into District level accounts togetherwith the other services, making cost analysis of theindividual services very difficult to estimate.

Currently there is a plan to separate the management of thenetwork into two areas covering the north and south of thetown, but this plan has not yet been implemented.

During the Preliminary Design Phase of the Edfu Project anassessment was made of the internal O&M ManagementCapability of the existing Edfu water service. The majorproblems perceived by Edfu managers are the delays anddifficulties of obtaining funds for O&M, and the very lowsalaries which force staff to take second jobs to make endsmeet. Many of the weaknesses perceived were consideredresolvable only if an IWC is formed. (Annex *"*")

'AEdfu Town also operates a septic tank emptying serviceusing vacuum trucks. This service is also under the controlof Edfu Town Engineering Affairs Dept and is a separatedepartment to water supplies.


c. Edfu District Village Water Supplies

Water supplies for Edfu District villages are the directresponsibility of the MHPU office in Edfu District whoassist in the technical O&M. The Village water supplies arethe administrative responsibility of the Village Chiefs whosupervise the staff assigned to village support sections asfollows:

- Engineering Section which carries out routine O&M ofthe system with support from District Housing ServiceDepartment

- Financial Affairs which prepares the budget proposalsfor all village service sections, including watersupplies; responsible for meter reading and billcollection

Although most of these services are operating they sufferfrom poorly .maintained equipment; the systems have beenplanned on a piece-meal basis which makes operation morecomplicated than can be managed; O&M funding is inadequateand the systems provide a low water quality supply.

2.1.3 Need for Institutional Development in Edfu Project

The discussion above shows the wide recognition in Egyptfor continued efforts to improve the performance of thewater and wastewater sector; decentralisation is seen asthe appropriate means:

- The Upper Egypt Consultants Study (1987) analysed thestrengths and weaknesses of existing institutions andgave detailed institutional development proposals forAswan and Qena Governorates using the IWC concept.

- The Danida Appraisal Mission Report(May 1990) proposed

a less ambitious approach;it considered that theexperience gained from the three semi-autonomous waterutilities in Egypt would be difficult to assimilatebecause <pf time constraints.

The Mission Report stressed the importance of strengtheningthe internal O&M capability of the Edfu management,including the need for a separate accounting and budgetingsystem to monitor the financial performance of the waterand sewerage schemes.

The perceived weaknesses of the water and sewerage servicesin Egypt are rooted in the fragmentation ofresponsibilities for long term planning, O&M management andbudgeting, personnel policies, and finance and tariffstructures:

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- Capital investment needs for long term planning (under

the 5 year Plans) are assessed by NOPWASD althoughallocations are made to at least eight nationalgovernment agencies in addition to the 26governorates. The bulk of investment goes to the largemetropolies; only 26% goes to the provinces which have76% of tthe population of Egypt.

^ O&M management and budgeting is the responsibility ofthe municipal councils for urban areas, and MHPU formost rural systems. The annual budgetary processis largely controlled by the Ministry of Finance.

- Personnel policies and training programmes are theresponsibilities of the Governorates, the CAOA and Minof Manpower; training is not planned in response tolocal needs and is carried out by both NOPWASD and theCAOA. A major weakness in Egyptian local government isthe often cited problem caused by the guaranteedemployment policy for school leavers and graduateswhich has led to gross overstaffing and low pay.

- Tariff levels and structures are a highly politicalitem; the current set of tariffs was decided at thenational level by a Supreme Committee for Policy andEconomic Affairs in 1985; the tariffs do not allowservices to even cover O&M costs.

2.1.4 Issues in the Decentralisation of Public Utilities.

Decentralisation of local government, including theformation of the IWCs, raises a complex set of issues whichgo to the heart of the debate about how Egypt shouldprogress. These issues are common to all countries and atall times:

a./ National'Development Issues

Every modern state has institutions through which stateofficials and employees provide public services andfunctions on a day to day basis. Local administration isdispersed throughout the country for revenue and taxcollection, the administration and management of utilitiesand services, the maintenance of law and order, and tocarry out government policy.

The administrative structures and processes of the modernstate contain the conflicting needs of maintaining thehegemony of the state, in the form of policy making,coordination and control,- against the demands of thepopulation for local autonomy and participation in theprocesses of government. This conflict is inevitable.

There is no theoretically optimal way for goods and

services to be produced and distributed within an economy.Present arrangements are a result of historicalcircumstance; the exingencies of nation building; thelegacy of ideas -especially the legacy of the nationallyplanned economy; and international political pressures.

This is true also for the water supply and sanitationsectors which are tied into the local government system.The established semi-autonomous IWC model with itsreasonably successfull track record contains considerablepotential for improving the performance of water utilities.The issues are complex and sensitive.

b./ Decentralisation of Authority Issues

Local government systems in Egypt can be analysedtheoretically in legal and administrative terms, but theirpractice can be best understood as the resolution ofconflict between the bureaucratic rationalism of thecentre, and the diverse interests of groups making up theEgyptian body politic. Local Administration shapes and isshaped by the political economy of Egypt- the competingfamilies, classes, regional groups etc with their differentagendas. Decentralisation strategies are equally affectedby these themes.

Centralisation of power is an old tradition in Egypt andthe old monarchial regime was a target for reform duringthe Nasser era . Local Government was restructured in 1960to eliminate, rural feudalism, mobilise rural support, toallow a rapid extension of central government services, andpromote rational planning and budgeting.

Decentralisation of decision making to the regions was ameans to carry out central policies and gain support forthe state at the local level, largely by seeking thesupport of the rural middle class through the electedPopular Councils. However observers conclude that theelected councils and budgetary processes still largelyserve the interests of the centre.The slow progress insetting up additional IWCs since 1985 may be a consequenceof this.

Decentralisation of decision making to the service regionsis advocated for reasons of administrative efficiencybecause of the distances involved. An arguement against isthe loss of economies of scale. Several studies on the IWCsexisting in the richer and more highly populated Deltaareas have recommended the joining together of additionalgovernorates to gain increased scale economies forplanning, purchasing, and O&M functions. This may suggestthat Aswan and Qena Governorates could consider combiningto form a single IWC in the future.

The shortage of trained and experienced staff is also usedas an arguement against decentralisation; there is a fear


that local leaders, administrators and sector staff cannothandle development projects as effectively as the centre.Skilled staff tend to gravitate to Cairo for career andincreased opportunities.

This arguement is a self-fulfilling prophecy, however,because low career opportunities in the regions force ablestaff to leave, further reducing the capability of regionaloffices.

There is an obvious need for a more effective top down-bottom up systems of Planning ,Programming and Budgeting(PPB) in all local government services and functions.These would use the special expertise at the centre forcoordination and policy making, and allow the regions totake increased responsibility for day to day generaloperations. Support for changes of this sort extend acrossseveral ministries (including NOPWASD).

c.l Local Government Finance Issues.

The authority that local government officials have overLocal Government finance reflects the real nature of thedecentralisation of administrative power. It is in theactual authority to make decisions over revenues andexpenditures in the budgetary process that effectivedecentralisation can be said to exist.

Government revenues are collected from a wide variety ofsources at all levels of the administration. Centralgovernment has access to the highest yielding sources, suchas corporate taxes, customs duties, income tax, which havea high collection efficiency from high income sectors.Local government, however, has access to local revenueswhich have a low yield and are difficult to collect. WaterUtility tariffs are one of the few local charges amenableto enforcement because of their high use value toindividual households and the ability to identify users.

In Egypt revenues collected by all levels of governmentaccrue to the centre. Central government is perhapsunderstandably reluctant to devolve spending authority tothe regions because they want strict control over spendingin order to reduce central government deficits fromincreasing subsidies to the regions.

Local government in Egypt has a growing dependency oncentral funding. The centre appears to believe that localrevenues have little potential for expanded collection.For the operating utilities dependent on centralallocations the consequence is that O&M is poorly financed;many of the assets are being depreciated in the process.

Observers suggest, however, that local populations in factare willing to pay pay more for local projects providedthat the benefits reach them directly and immediately,

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rather than wait for the allocation from the centre.

The only locally raised tax that can be spent locallywithout the approval of the center is the Local ServicesDevelopment tax. This obtains some revenues from a range oftaxes on local services and profit making ventures. Butthere is little guidance on its effective use and somepressure at national level to absorbe it into centralaccounts. It is being used by one Water utility in Egyptfor O&M funding and may be a feasible model of a valuablemedium term source of local revenues for O&M supplementaryfinancing at Edfu.

The main argument for central control over localadministration finance is the potential for redistributionto the poorer regions of centrally collected income, andthe ability of the central government to enforce itsinvestment policies at the local level. The equityobjective could still be achieved, however, with a mix ofcentral and local revenues.

The main argument against this central control of budgetingis the 'dependency' it creates at the local level, and thestifling of local management initiative, -especially in thepublic utilities. It may also be argued that central fundscould be dispersed as a block grant to the Governorates forlocally perceived needs, rather than as a general grantapplied through the line Ministries.

There is a complete separation between the revenue andexpenditure sides of the local government budgetary processin Egypt. Local government services can spend the O&M funds•budgeted to them with some flexibility, but they cannot getmore. This presents serious problems for the efficientmanagement of municipal public utilities where suddenbreakdowns of plant or equipment can be repaired only afterexhaustive applications at Governorate level and longdelays (delays of up to five months are reported at Edfu)

d./ Burocratic Culture Issues.

Water utilities are a process industry with steady- stateoperating service levels and standards to meet. They needan effective management system, however, that allowsgreater intelligence in corporate planning and operation.

A major problem of improving existing services, even iflaws, regulation and operating practices are changed, liesin the difficulty of altering the burocratic culture oflocal government organisations. Staff and employees havelearned by experience to adopt a no-risk, genuflectionaland no-confrontation approach to their superiors ratherthan use their intiative to sort out the shortcomings theysee in their jobs.

Incentives, both financial and professional are required.

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Institutional change is a slow process and needs long termsupport at all levels. Interviews with staff at Edfu andAswan suggest there is a strong desire for change.

Some of the weaknesses of the existing municipal serviceshave already been discussed. They come under theadministrative umberella of the governorate offices whichthemselves are complex, large scale organisations with amultiplicity of objectives. The services operate under adual supervisory system - technical direction and financefrom the central ministries, but administration andmanagement direction from governorate offices that have fewspecialist skills in the service sectors.

There are potentially serious policy problems which arisewith the decentralisation of authority to the local level.Socially progressive externalities (such as subsidisedcosts to low income groups) may be lost without theinsistence of the centre, especially if the services becomemore profit oriented. This may be a potential source ofresistance to the IWC concept.

2.1.5 Independent Water Companies in Egypt

a./ Reasons for IWCs

The Independent Water Company(IWC) concept for a unifiedwater and wastewater organisation at Governorate-level isseen as a remedy for many sector weaknesses. IWCs have beenconceived as a part of a programme to rationalise,coordinate and unify the sector covering all water supplyservices in Egypt to meet the following objectives:

- to establish clearly defined financial objectives andperformance criteria, reduce the web of detailed timeconsuming administrative regulations, and give themanagers more authority to manage the utility.

- give the IWCs a free hand to design a personnel policyfor recruiting and hiring staff, and balance staffnumbers and skill categories more closely with needs.

- improve the manpower training system to developcompetant management, technical and financial skills

- develop and improve the O&M procedures and systems,including staff training; planning,programming andbudgeting for annual O&M costs; increased cost recov

ery

- establish effective communications between the waterand sewerage sectors to coordinate planning and O&M.

b./ Experience with existing IWCs

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The IWC model was expected to remedy most of the problemsof external fragmentation between Ministries and poorinternal management of O&M at utility level. Although theIWCs will remain public companies they enjoy a much greatermeasure of operational autonomy than other municipalservices and have less outside interference. Theirperformance will continue to be monitored by NOPWASD.

Only three Governorate level IWCs have been formed in Egyptso far out of a total of 24 Governorates. These are in therelatively well developed Delta region with reasonablelocal facilities and access to spares, skilled staff, andclose to Cairo.

A recent survey carried out in 1990 on the IWCs drew thefollowing conclusions:

- IWC Autonomy and Decentralisation. As they exist nowthe IWCs are not autonomous - nor do they exercisedecentralised decision making powers. The annualbudgets must be approved by NOPWASD, the GeneralAssembly and the MoF. They have not appointed anofficial Chairman and Board of Directors - who areneeded if the IWCs are to take full advantage of anautonomous status such as increasing tariffs to meetthe real costs and taking on investment loans. MoFaudits the accounts.

- Financial Viability. The IWCs produce about 60-80% ofthe revenues needed if they are to cover O&M costs.The cost accounting procedures are not effective indeveloping the annual budget. Budget estimates aremade based on historic allocations with incrementalincreases. There are no capital reserve accounts forfuture investments.

- O&M. The existing IWCs are undoubtedly better managedthan those still in the local government sphere, -ableto get materials for maintenance when they need it.However they do not have effective preventativemaintenance programmes with record keeping andaccountability for materials, parts and time spent onmaintenance. Assets are poorly maintained anddepreciate quickly . The staff do not yet receive thenecessary training. Workshops and stores areconsidered to be inadequate.

- Personnel Management. Employees are treated the sameas in other Government Departments under the sameLaws. Incentive payments are being made but these arecomparable with bonuses in other government agencies.Staff professionalism, job placement and morale arehigher in the IWCs, although this will depend on theskills of the General Manager.

2.1.6 Combined Water and Wastewater Utilities


a./ Existing Situation

At present water and wastewater services are run asseparate operating divisions within the municipalities.None of the existing IWCs have a joint water and wastewaterutility. Because wastewater has a low priority and thereare few operational plants this is understandable.

Problems with wastewater utilities are universal:

- the status of wastewater is inferior to that of cleandrinking water supplies,

- the status and qualifications of employees is alsoinferior.

- despite the 50% permitted surcharge for wastewater fewmunicipalities charge the appropriate tariff and therehas been little effort to educate the users on theneeds for better wastewater disposal

b./ Reasons for Combining Water and Wastewater

The advantages of combining water and wastewater utilitiesunder a common management are :

- efficiency gains by combining management andadministration for tariff collections, financialcontrol bulk purchase of common items such aschemicals,

- allows joint sharing of facilities such as repairshops training centres, administrative buildings

- specialist staff can be pooled and shared on a rotating basis between the services

- possible source of income from commercial use of wastewater in high value-added crops in the desert.

There are also disadvantages:

- water supplies may get preferential treatment by theIWC because subsidies are more easily forthcoming;possible reluctance to accept wastewater facilities.

- potential contamination through sharedequipment/tools.

Of the existing IWCs only Kafr El Sheikh is in favour of ajoint Water and Wastewater service, largely because theyare the beneficiaries of a major programme of sewerrehabilitation. The biggest obstacle is the cost of runningthe wastewater service. Edfu management have expressedtheir reluctance to take on Edfu wastewater services withinan IWC for the same reasons.

2.1.7 Aswan IWC - Implications for Edfu Project

Decentralisation. The main advantage of the IWC is theincreased autonomy to make decisions and plan the system ona local basis. MoF will still finance a large part of the

O&M costs but local revenues stay within the utilityaccounting system. This may be a reasonable way to balancestate mandated effectiveness and equity objectives withutility efficiency objectives. It is not clear how theexisting IWCs negotiate their subsidy requirements withMoF.

Aswan Governorate in a meeting with Edfu Project staff on17th April 1991 expressed a strong interest to form an IWCfor Aswan Governorate and requested assistance. All staffinterviewed within the water sector approve strongly of theIWC concept for professional and remuneration reasons

Time Needed to form an IWC. It takes at least 2 years toform an IWC, taking into account the work that has to bedone to train staff, value the assets, set up systems etc.

Management. Utility managers at governorate and Districtlevels are less constrined in making decisions withoutconstant referrals to higher levels. This includes theeffective use of a cost accounting system at Edfu as partof an O&M planning, programming and budgeting system.

Staff Performance. Measures can be taken to improve staffperformance by locally agreed incentives, trainingprogrammes, redeployment of redundant staff, flexibility inmanning levels based on actual needs. Edfu staff may be re-assigned between the water and wastewater service.

Conflict with other GoE Agencies. MoF has declared itssupport for the IWC concept so there will be no resistancefrom higher authorities. However at the local levelresistance may be expected from other local governmentunits that will not receive the same benefits.

Joint Water/Wastewater Organisation. There are obviousreasons for combining the water and wastewater componentsof the Edfu Project in a single organisation. For Edfu,where wastewater facilities do not yet exist, a jointoperation would allow staff to be spread between the twoservices and limit the demand to hire a new set of staff.

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7.5 Edfu Project : Institutional Development

7.5.1 Water Utilities - Strategies for O&M Improvements

7.5.1.1 Need for IWC at Aswan.

The Institutional Study was designed to research andrecommend administratively feasible ways of strengtheningthe Edfu water supply institutions to ensure long termsustainability - ie the system should continue to deliveran acceptable service long after the Project is completed.

Critical external factors include the control of O&Mfinance by the MoF; fragmented responsibilities formanagement of the system within Aswan Governorate andbetween local government agencies at Edfu; staffingappointments and staff numbers decided without consideringthe real needs of the Edfu system; tariff levels set byCentral Government at a subsidised level without fullycompensating'the service for the costs involved.

Internal factors at Edfu include lack of trained staff;poor management systems and practices; lack of spares,tools, materials; run down assets.Many of these internalfactors will be strengthened during the Project. Theseproblems are not unique to Edfu.

This Study concludes that:

- the major institutional weaknesses of the Edfu Project,-fragmented responsibilities, can only be handled if an IWCis set up at the Governorate level. The IWC administrativevehicle has been accepted in Egypt and it will not bepossible to develop a similiar system for Edfu only.

- potential changes have no value except in the specificconditions bought about by the actualisation of the IWC.Setting up the IWC means setting up the systems.

- individual activities at Edfu to improve the accountingsystems and O&M Budgetary Framework must be part of aprogramme of longer term changes at Aswan if they are to beeffective. If not they will be at best a paper exercise;the main question about all management systems is who willuse the information.

- care must be taken that the potential benefits of an IWCare not swallowed up by increased salaries for staff.

The IWC organisation consists of a Head Office at thegovernorate level, and Divisions at the District level.Decision making is decentralised to the levels at whichauthority is to be exercised within the governorate. The


Decrees and Regulations for the IWCs allow the IWC Board awide range of powers, including external borrowing. Inreality it must be expected that the IWCs will developtheir corporate ability slowly over a period of years.

This Section focusses on the specific ManagementInformation Systems (MIS) to improve O&M Management in thecontext of an Aswan IWC; it covers the Cost AccountingSystem and O&M Budgeting Framework which allow real coststo be assessed and budgeted for. Developing these systemsalso requires work on a wide range of management activitiesand tools, such as financial and personnel management.

Better O&M Management implies that the causes of currentfragmentation are addressed. Improvments to MIS at Edfuwill also be used throughout the Aswan Governorate IWC.

7.5.1.2 Improving Edfu O&M Systems,

a./ Problems with O&M Management.

Edfu water service currently operates within the existingstructures and processes of local government. Key problemswith present O&M Management practices at Edfu are:

O&M Management Systems

- there are no guidelines on O&M policy and preventivemaintenance procedures for the system at Edfu; the WWISPProject at NOPWASD has developed a standard O&M ProceduresManual for water and wastewater utilities but these are indraft form and do not describe how O&M planning is to betranslated into practice.

- there are no records on assets, equipment or theircondition; work order systems are not used; the stocks ofspares, inventories and chemicals is completely inadequate.

- there are no planned procedures for O&M Budgeting andthis is a. major MIS component that should be developed.

Finance Management

- water service budgets are consolidated with the budgetsof other services at municipality and governorate level andthe service managers have few performance indicators toevaluate system effectiveness. The Cost AccountingSystem(CAS) will provide the basic data for all otherfinancial mangement systems.

Personnel Management.

- under present regulations the managers have little real


authority over staff allocation, training or perfprmance.The Edfu Project must design and carry out on-the-jobtraining for administration and accounts staff and allowfor incentive payments for performance.

b./ Improving O&M Management.

The approach to O&M Management performance improvement atthe utility level is to:

- design achievable O&M management improvement programmesto meet the required objectives. The improved systems maybe introduced on a step-by-step basis, gradually improvingthe most essential areas first.

- set up performance indicators for the system's functionsand operating divisions which are the target for O&MManagement performance improvement. This requires thatworkable improvement models and appropriate MIS systemshave already been accepted within the utility.

- and assign the appropriate resources, including staff,training resources, technical assistance, finance.

A key problem is to identify workable indictors which coverboth internal management and external social objectives, ieto measure gains in efficiency as well as the policy andsocial effectiveness of the service to meet GoE regulatoryrequirements.

The indicators can be monitored to evaluate the success orfailure of the improvement measures; at the very least theyfocus the attention of the managers on the problem areas.At the governorate level they allow utilities to becompared, problem areas can be identified, and localimprovements targeted.

Improvements to O&M Management need a broad range ofimprovement activities within the management functions-manyat the governorate level. These have different potentialimpacts on O&M Management (Table 7.1) and they are inter-related in implementation and practice.

Table 7.1 lists activities to set up the managementfunctions of any semi autonomous enterprise; many of thesemay also be used in a local government systems.

The tools are standardised plans, procedures, models,schedules etc that managers use to manage effectively. TheCost Accounting System is an essential tool and is abuilding block used in most of the other functions. The PPBprocess integrates a diverse set of tools.

TABLE 7.1 Management Functions, Activities and Tools.

ManagementFunctions

Activities Tools

O&M MANAGEMENT : OPERATIONS

Operations > get Manufacturer's manualsdevelop operating rulesfor all system components

> develop control rulesplan for quality standardsfor water/wastewater output

develop task schedules andstaff responsibilitiesdevelop standard reportingproceduresdaily maintenance schedules

- monitoring procedures

- sampling and analysis requiredfor system process and out[puts

- organise communication systemswithin management and staff

Operation Manualson all plant, equipment

Charts and diagramsRegulatory Reports

Organisation Charts, JobDescriptions for tasksReport Forms.Logs

Schedule Lists with minormaintenance tasks

Schedule Lists andResponsibilitiesForms, Procedures Manuals

- Staff Responsibility Manual

MAINTENANCE MANAGEMENT PPB- Planning

- Programming

- Budgeting

- develop maintenance strategy- collect data on all assets

equipment, stores,materials- make inventory of all resources,

including staff, materials.finance- define maintenance tasks- define task standards for both

preventive and other work- schedule maintenance tasks

develop programme to meetmaintenance targetscompute resources needed

estimate costs for thecoming period

- Preventive Maintenance Plan- Asset Inventories and

Condition Assessments Schdls- Assessment Summary Sheets

- Daily, Weekly, Other Schedules- Task Performance Standard

Sheets- Work Order System

- Maintenance ProgrammeWorksheet

- Materials,Equipment andStaff Sheets

- Maintenance Budget

TABLE 7.1 (cont) Management Functions, Activities and Tools.

ManagementFunctions

Activities Tools

FINANCIAL MANAGEMENT

Planning/Budget

Revenues/Tariffs

Procurement

Accounting

Cash Mangmnt

Debt Mangmnt

- identify service objectives- develop O&M strategy- develop O&M programme budget- monitor UAW, accounts

receivable,customer connections- develop cost recovery plan using

surcharges approach- develop purchasing policies

- materials use programme- set up CAS with IWC staff- redesign financial control

systems for utility- forecast cash flows- invest surplus cash

- (currently IWCs do not

manage their debts)

Maintenance Manual for AssetsCAS.PPB System,

Metering.Collection,BillingSystem and Records

Purchasing Rules and Begins

IWC Procurement SystemCAS ModelsFinancial Statements, MISSystemsCAS, Billing Projections

Investment Regulations

PERSONNEL MANAGEMENT

Planning

Training

Management

• establish staff neededinventory of staff resourcesmanpower development progm

assign staff to new worksplanning for joint W&WWorganisationestablish training needstask analysis for systemtraining scheduledevelop curriculaestimate costsselect staff for jobsemployee relationsdesign benefit structurepromote career development.

- Organisation Plan

- Human Resources DevelopmentPolicy for IWC

- IWC Plan

- Job Descriptions

- NOPWASD Programme

- System Tasks- Personnel Policy Statemenmt- IWC Benefits Policy


The detailed design of the functions depends on the scopeof control wanted by the Aswan IWC and the resourcesavailable. In practice MIS will be introduced slowly withthe most basic components first.

The Edfu Project is in a usefull position to be a pilotproject for improvements to other water systems in theAswan Governorate IWC because:

- the Project will develop a complete data base onpipe networks, plant, equipment; this data base, andthe way it is made, can be a model for the othersystems. It will include Equipment Records.

- a complete stores and a spares inventory will beestablished, including Inventory Control Records,

- staff will be trained and a new office constructed;technical support will allow on the job training fortwo years after Project construction, including theuse of the MIS set up during the Project,

- many of the current NOPWASD proposals can be reviewed,implemented or tested,

- the performance improvement activities at Edfu will bemade in parallel with the activities to set up the IWCin Aswan Governorate and both programmes can be run inparallel,

7.5.2 Edfu Project - Immediate Project Tasks.

7.5.2.1 Cost Accounting System

A Cost Accounting System (CAS) for the water and wastewatersector in Egypt has already been proposed by the WWISPProject (Cost Accounting Procedures:CG-10/Sept '91). TheCAS will initially be set up in parallel with existing GoEaccounting procedures, categories and line items, and is anessential management tool for monitoring costs within theutility activity areas.

a./ Present Accounting System.

The GoE system for control and accountability in localgovernment is worked out through the Annual Budgetaryprocess. Budget categories and line items provide thecommon denominator for expenditure and revenue accountingat all levels. The water services currently operate underthe same process, using the same categories and line items.

The Local Administration Finance system is governed by Law


43 (1979) and Law 145 (1988), which determine the varioussources and levels of revenues that can be obtained by eachadministrative unit and at each level.

The budgetary process itself, like most local governmentsystems, is malleable within certain limits; it can beshaped if senior staff are willing to exert theirauthority.

Revenues from municipal water services are deposited tocentral treasury accounts and are not used within theutility or as signals to local government staff on how muchthe sector should spend; there is no incentive to maximiserevenues from user charges.

Budget expenditures are decided at the central governmentlevel, with some flexibility for discretionary transfers atgovernorate level. Local services cannot be managed asenterprises with their own accounts under the currentsystem. Usually the historic budget sums are used forpredicting the next years budget. The water systems work ona 'cash available' basis.

Budgetary accounts in Egypt consist of sets of accountcategories (or Babs), with four Babs on each side of thebudget equation. Each Bab consists of a number of lineitems which are consolidated into global sums as thebudgetary process works up to the central level (Table7.2). The new Cost Account System must work with theseexisting line items where possible.

The existing system of records of cash received anddisbursements made is detailed, but difficult todisaggregate even at the utility level. Historic costs arenot easy to interpret.

b./ Need for Cost Accounting System

The present financial management system does not emphasisethe importance of costs as key information for decisionmaking. Few managers are cost conscious nor are theyexpected to be by the system they work within. Costinformation is not used in planning O&M activities,primarily because O&M funds are rationed. Cost awarenessmust be developed at all levels of the system.

A CAS is built around individual Cost Centres; these areselected functions, operating components, or projectswithin the utility against which costs can be assigned asthey are used. Typical Cost Centres will include IntakeWorks, Treatment Plant, Maintenance Districts, StaffAdministration, Departments for Billing etc, and willinclude the costs of staff, materials, power. The detailedselection of the Cost Centres must be made at the

Table 7.2 Budget Line Items : GoE Local Administration

Current Revenues Current Expenditures

Bab I : Sovereign Revenues

1.1 Agricultural Land Tax1.2 Building Land Tax1.3 Entertainment Tax1.4 Motor Vehicle Fees & Taxes1.5 Share of Common Revenues1.6 Share from Joint Fund1.7 Share of Suez Canal Taxes

Bab II : Local Revenues

II. 1 Locally Operated Utilities11.2 Collections/ Service Directorates11.3 Local Fees and Charges11.4 Productive Project Profits11.5 Quarry Revenues11.6 Misc. Fees and Charges11.7 Special Funds

Bab I : Expenditures

I.I SalariesWagesBenefitsAllowances

Bab II : Local Expenditures

Group 1- Physical Requirements1. Raw Materials2. Fuel Oil, Power3. Parts and Equipment4. Packing Material5. Stationary and Books6. Water, Light, Elec, Gas7. Fittings and Small Equipment

Group 2- Service Requirements1. Maintenance Cost2. Costs of Operation3. Research and Experiments4. Publicity5. Stationary and Printing6. Transport and Communication7. Rent of Equipment8. Subscriptions and Foreign Taxes9. Cultural and Foreign Cooperation10. Training Costs11. Contingencies12. Various Services13.Agency Service Costs


governorate level so that costs can be monitored andcompared on a common basis.

The Cost Accounting System will provide regular andaccurate records on the real costs of running the utilitiesthat can be used in all aspects of financial management andreporting, including:

- collects cost data from the Stores Inventory Control,Work Order System,

- checking on problem areas as they arise and likelyshortages of spares, materials etc which will limitthe programmed O&M . Cost Centre data will be reportedon a regular basis, usually once a month.

- annual Financial Statements showing the performance ofthe system; this will be used by the IWC Board andAssembly, and GoE auditors. Foreign Donors or lendingBanks may be expected to show keen interest.

- the annual O&M Management Budget for submission tothe governorate and MoF; the CAS provides realisticvalues of historic costs.

c.l Structure of CAS

The CAS provides a systematic process of collecting,summarising, and reporting costs. The WWISP Reportprovides a basic and standard structure of the system:

- Sources of cost data; salaries paid; purchases made; costof materials used; and internal shared costs and transfersout of the system.

- Data Processing; the collected data is processed andsummarised in monthly reports for each Cost Centre; this isused to compare the planned expenditure for the Centre withthe actual costs.

- Management: the cost information in the reports is usedin internal documents which managers can interpret to planany remedial•actions.

The design of the CAS should be simple enough for the Edfustaff to understand and use, but be comprehensive enough toprovide an Accountancy Framework for the later developmentof monitoring systems for the Aswan IWC. It should be basedon standard procedures and forms in a CAS Manual.

d./ Implementing the CAS at Edfu


The CAS must be designed in parallel with future work toset up the Aswan IWC, and in close collaboration with thevarious ministries and agencies who may use theinformation. A review of the Standard CAS in other IWCswill be a usefull first step; a study of the difficultiesand problems will show how to plan the work.

The finance staff who will use the CAS at both Edfu andAswan should be closely involved in the design of thesystem and the preparation of the Manual. Much of theaccounting data is considered very sensitive by localgovernment and the Cost Centre approach will need carefullexplanation if the data gathered is to be usefull.

7.5.2.2 O&M Budgeting Framework

An O&M Budgetary Framework for the Edfu Project willinvolve considerable effort at both Aswan and Edfu. O&Mmanagement tools, procedures and systems can only bedeveloped within a policy of preventive maintenance. Thisis operationalised through the Planning, Programming andBudgeting(PPB) process.

The Framework will allow the present conditions of theutility,- its physical state, resources available, userdemands etc,and the plan for the system, to be consideredas an input to a proposed programme of O&M activities. TheFramework links together the staff, regulatory parameters,and agreed administrative procedures for the IWC.

The Framework provides a basic supporting structure; thePPB process can be developed a step at a time starting withthe appropriate parts of the complex model given in Table7.1. It allows the condition of the water supply systemsto be measured and upgraded through multi year programmes.This will be very usefull for the other utilities in Aswanthat are in poor condition, although Edfu itself will beas-new at the end of the Project.

The WWISP Report on O&M (CG-13/ Oct'90) has addressed theproblems of O&M but has not considered fully how O&M needscan be translated into budgetss. Experience in other IWCsand utilities in Egypt shows that most organisations do notplan for O&M in a systematic way.

It is important that the O&M Budgeting Framework is withinthe capabilities of the staff who will use it. Experienceworldwide shows that institutional improvements take a longtime to take root and considerable support may be necessaryat all levels.

a./ Present O&M Budgetary System.

1-\0


The present budgetary system is based on "funds available"allocations from the central government budget directives.The sums are related to historic allocations rather thanactual system needs. In theory the water srvices areexpected to present budget proposals for the next yearbased on their own estimates, but in practice they followMoF guidelines on revenues to be collected and expendituresallowed.

The consequence of poor O&M budgeting is that assets aredepreciating too quickly, the systems are run on a crisismanagement basis, and the service delivered to users is notas good as it could be.

The budgetary system is complicated further in that theallocated O&M budget passes through the municipal officeswho are responsible for a number of urban sevices. There isan inevitable competition for funds.

b./ Need for O&M Budgetary Framework.

Ad- hoc budgeting and lack of funds for O&M are perceivedby Edfu managers as a major problem in maintaining theservice effectively; this opinion is widely shared acrossutilities in Egypt.

An O&M Budgetary Framework assists managers make rationalplans for O&M performance improvement and gain some controlover the way that funds are budgeted. It allows assets andthe system's service to be improved over time. Anyvariations in work to be done or funds available can behandled more rationally.

c./ PPB Process

The PPB process is the heart of O&M management and iscarried out in three iterative stages: planning forappropriate levels of preventive maintenance following anagreed policy; programming work schedules and resources tobe allocated; developing a cost budget to meet theprogramme. The process is multi-year becauseprogrammes,standards and resources from one year will feedinto the next year's plan.

Planning for O&M contains the following basic activitiesand tools:

- asset inventories and condition assessment's for pipes,equipment, plant, including consideration on how the assetsare to be maintained and the immediate need formaintenance.This information is used to build up a RecordSystem in which all future work on the items is listed.The Records include plans, diagrams, summaries, and all


relevant data. The condition assessment is used as anindicator to quantify the status and improvement of theassets.

- a resource inventory of vehicles, tools, workshopfacilities, stores, chemicals; spare parts in stock; cashavailable for the next year's O&M.

- identification of the tasks for the coming year toachieve agreed O&M standards for each item following theO&M strategy. Tasks and their anticipated frequency arenamed and listed. A Work Order Svstem(WOS) may be developedto detail and manage the maintenance work and as a database for the CAS using weekly, monthly etc timings. In asmall water utility the scope of the WOS can be limited torecording work actually carried out, although standardtasks can be reported on pro-formas.

Programming and Budgeting for O&M translates the plans intoa feasible work programme which can be funded:

- estimate resource requirements to implement the chosenO&M plan for the system components for the coming year;this is based on the inventory of assets, maintenance taskdefinitions and task standards.

- schedule tasks over the budgeting year, or years for amulti-year programme.

- calculate costs for the programme and compare withresources available; this programme may be altered if fundsare inadequate or if emergencies occur.

d./ Implementation of O&M Budgetary Framework.

The O&M Budgetary Framework for Edfu may provide a modelfor other water utilities in Aswan Governorate for the IWC.

The O&M Budgetary Framework for Edfu must be agreed withthe Aswan Governorate office. The systems chosen should fitin with Aswan and NOPWASD requirements for essential data;standards to be achieved; staff available. The PPB processat Edfu will develop O&M budgets which have to agree withAswan plans for investment for the next year.

The PPB process is made up of component parts whosestructures can be copied from existing systems and modifiedto suit the needs of the Edfu system and Aswan IWC. Areview of the reports on the water and wastewater sector,however, suggests that few water and wastewater utilitiesmake much use of PPB processes because of lack of easilyapplicable models, lack of management staff with the

1 -


success of improving the Edfu O&M management ability, andthe use of the GAS and O&M Budgetary Framework tools,depends on the potential changes made possible by the IWCstructures.

How to set up an IWC at Aswan is an administrative questionwhich must be answered by the Aswan Governorate staff andby GoE ministries. It requires a full understanding of theissues by all involved and full committment.

The time scale for the establishment of an IWC is at leasttwo years- to complete the inventories and valuation ofassets, carry out staff training, develop the appropriatetools and procedures, design operating rules, organiseaccounts etc.

7-

I0IIIIIIIIIIIIIIIIIIII

8.5 Software1Components

a./ Institutional Study Origins

The Dangroup Proposal (Oct 1990) suggested additionalconsultancy inputs to those given in the TOR, covering astudy of financial and institutional aspects. Meetings withDanida after the contract was awarded agreed that the widerinstitutional context of the Project should be studied aswell as the accountancy and budgetary items.

During the Study activities the Aswan Governor stated hisintention to form an Independent Water Company (IWC) forthe Aswan Governorate similiar to those already formedelsewhere in Egypt. This decision makes the task ofinstitutional development much easier because basicchanges to administrative and budgetary practices at Edfucan only be made in the context of an IWC.

Preliminary proposals for O&M management improvement atEdfu assume that an IWC will be formed in the near future.

b./ Tasks to'be Carried Out.

IWC Formation at Aswan.

Discussion with Aswan staff has shown that the IWC conceptis well supported, but the implications in terms of work tobe done in setting up the IWC is not clear. The experienceof the three existing IWCs in Egypt is a valuable source ofinformation which must be studied closely. The tasks atAswan are:

- Feasibility of IWC at Aswan- Basic research into existing IWCs in Egypt- Discussion Workshops for Aswan Governorate and seniorWater and Wastewater staff .

- Assistance to Aswan IWC in setting up the IWC systems- Design Implementation Programme- Coordinate with Edfu Project.

Cost Accountancy System for Edfu

- Review other relevent CAS in IWCs and elswhere in Egypt.- Agree form and scope of systems with Aswan and NOPWASD- Design structure of accounts with utility staff- Design Forms,schedules, procedures, books, Manuals- Train Edfu staff in procedures- Monitor staff effectiveness and correct if needed.

O&M Budgetary Framework

- Review existing O&M procedures at existing IWCs; the


proposals from NOPWASD; the requirements at Edfu.- Agree form and scope with Aswan Governorate staff- Design structure of the Framework and PPB process inrelation to the needs of Aswan utilities.

- Coordinate inputs with Edfu Project for storesinventories, asset inventories etc.

- Design forms, procedures, Manuals- Confirm arrangements with Aswan , NOPWASD- Train staff on processes- Monitor staff and correct if needed.

c./ Resouces Needed

At this stage an accurate estimate of resources needed toset up the O&M management improvement activities cannot bemade; the Aswan decision on forming an IWC will be a majoritem.

However considerable technical assistance will be needed byEdfu staff and this is outlined below:

With Aswan IWC

- Aswan IWC Feasibility Study and Assistance- Cost Accountancy System- O&M Budgetary Framework

total

Without IWC at Aswan

- Cost Accounting System- O&M Budgetary Estimating Model

total

3 months3 months4 months

10 months

3 months2 months

5 months

d./ Costs of Technical Assistance

With Aswan IWC

Without IWC

ExpatriateEgyptian

ExpatriateEgyptian

10 mm *10 mm *

5 mm *5 mm *

total

IIIIIIIII1IIIIIIIIIII

ANNEX ̂

EDFU WATER SUPPLY : O&M MANAGEMENT CAPABILITY ASSESSMENT

1. PURPOSE

- to assess how current O&M practices affect theperformance of the Edfu Water Supply utility.

- to assess how current weaknesses in O&M practices canbe improved by feasible administrative changes at theDistrict, Governorate and National levels.

2. APPROACH

There is a wealth of research evidence available in Egyptindicating that municipal water supply systems are operatingat the limits of their capacity; that O&M is carried out ona crisis management basis; that staff are poorly paid andmany lack appropriate or sufficient skills; that managersare unable to manage effectively because they do not haveadequate responsibility; that the budgetary process, whichseparates revenues from expenditures, limits effectiveplanning for O&M.

Remedies for these perceived weaknesses propose increasedmanagement and revenue raising autonomy for the utilities.This Study also reviewed the initiative of DaqahliyaGovernorate in establishing a Water & Wastewater MunicipalFund (W&WWMF), and the activities of several Governorateswho have established Independant Water Compnanies (IWC).

It is clear ,however, that the smaller provincial utilitieswill still require some form of support from central orregional government, and many utilities will need continuedtechnical support.

The field study assessment on Edfu's O&M ManagementCapability was designed to test out the validity of theperceived weaknesses described above, and to compare themwith the suggested institutional remedies. The assessmentwas made using 'semi-structured interview' techniques acrossa slice of Edfu's management and operations staff;from theobservations of the Project field team; and from directobservation of the utility's institutional environment.

Questions were prepared for both general and detailedreplies. This allowed Edfu staff to put their own position,and focussed on specific issues. The interviews assessed therespondents understanding of the wider regional planning andfinance issues affecting the sector.

3. RESULTS OF ASSESSMENT

Results of the field survey work are presented in the Tablesbelow.

Table 1: Basic Data on Edfu Water Utility Performance

Performance Measure for Utility Value1./ Level of Operations

- water production per day (cum)- number of house connections- number of commercial connections

2.1 Efficiency and Effectiveness- use of installed production capacity (%)- use of installed distribution capacity (%)- average water consumption/ domestic user (Ipcd)- water meters working (%)- unaccounted for water (%)

3./ Financial (annual data)- average revenue /cum sold (EL/cum)- total receivables from water sales (EL)- total Bab2 revenue (last financial year- EL)- total Bab2 expenditures (.. .. -EL)

4./ Staffing.- total staff- staff /1000 consumers

55008200N/A

100%100%80Ipcd66%40%

7.5 Pt/cum (ng 30cum/m)80,000 El (1989/90)N/A255,000 EL (1989/90)

87760

Table 2: Managers Evaluation of Edfa's O&M

Question Response Institutional improvement

1./ What are the most seriousdeficiencies in currentO&M practice?

2.1 How well does the systemperform and how is thismonitored?

3.1 How do staff perform inO&M management?

4.1 How to improve the.performance of the utility?

* lack of O&M budget to payfor chemicals, small parts, etc

' long delays (up to 5 months)in receiving requested partsafter order has been madeto Aswan or Cairo.

' poor inventory in Edfu ofspares, equipment, tools,etc.

' no way to compare or monitorsystem as records are not kept;system operates on a crisis basisfor maintenance.

* system shares commonproblems of overmanning; fewstaff incentives; ineffectivestaff placement; BUT staffperform well in operations.

* set up an Independent WaterCompany to: give more localcontrol over planning and funds;increase staff salaries andincentives; select staff.

- develop local sources ofrevenue within the control ofEdfu management.

- set up local stores and localordering system

- set up local stores andworkshops with adequate stocks

- set up O&M monitoring systemfor Project; this will make annualfor O&M management.

- government decisions onstaffing levels can be influencedonly in an IWC.

- IWC can only be set UP atGovernorate level, using existingadministrative procedures withinMinistry guidelines.

Table 3: O&M Planning. Programming, and Budgeting (PPB).

Observations on Current O&M Practice Approach to improvement

1./ Records for monitoring the system are not kept forrepairs carried out, spares used, asset inventories etc

2.1 Maintenance strategy uses 'crisis management'approach; there is no policy of preventativemaintenance for each component of the system

3.1 No forward programming of O&M work:. no assessment of O&M needs. no programme of work orders for maintenence

4.1 O&M budgeting based on monies promisedfrom MoF-Manshur for coming year; nobudgetary planning possible with smallsums made available

5./ Edfu O&M activities works with moniesavailable to provide a basic service.

- set up a basic data base for thenew system for planning maintenance.

- set up preventative maintenance systemusing data generated from Project

- set up programming system in Project

- set up a locally controlled O&M fundat least to increase O&M resources

- improve local autonomy to improvemanagers' effectiveness in decisionmaking; W&WW Management Fundand IWC approaches necessary.

Table 4: Cost Recovery Procedures

Cost Recovery Practice Approach to improvement

1./ Tariffs set by National Decree at a low level thatrequires national subsidies to keep thesystem working at a basic service standard;no local opportunity to increase water rates

2.1 Revenue collections and water use recordskept for system; collectibles not excessivemany meters not working - bills estimated

3.1 No relationship between expenditures andrevenues generated by the system; managerof utility has responsibility for technicalO&M activities only

- set up additional revenue funding fromW&WW MF or similiar to providesupplementary funds for maintenancecontingencies

- improve public awareness of need forbetter O&M of system and need forsurchages (ie, W&WW MF)

- improve management decision makingthrough improved PPB systems; this mayrequire the creation of an IWC

IVIIIIIIIIIIIIIIIIIIII

Table 5: Procurement of O&M Materials.

Observations on Procurement Practice Approach to improvement

1./ Records of materials, chemicals, spares keptand used are not kept up-to-date

2.1 No planning of procurement for year aheadbecause of budget constraints

3./ Procurement of items more than 100ELmade by tender; this is reported totake up to 5 months

- set up a basic stock inventory for thenew system for maintenance planning

- set up PPB system for O&M

- ammend ceiling for tender decision; useresources from W&WW MF or similiar

Table 6: Accounting System for Water Service

Observations on Accounting Practice Approach to Improvement

1./ No enterprise accounting system beingused at Edfu other than Local Administrationprocedures for recording revenuees andexpenditures.

2.1 Cost data for Edfu water service consolidatedinto Edfu Municipality annual accounts; costaccounting system for water supply componentsand cost centres not used.

3.1 Major purpose of existing accounting proceduresis to record data on water fees collectedand reach revenue targets set by MoF; expenditureaccounts are used to control expenditures withinallocated budget set by Mof Manshur.

- enterprise accounting system possibleonly with increased management autonomywhere the accounting system is part ofthe financial management tools.

- set up cost accounting system for Project;but this may only be used in an IWC.

- set up enterprise management accountingsystem to manage financial performanceat utility level; this will only be usedin an IWC

r824 eg91 o i edfu water and wastewater project ... · staff . decentral- ising decision making...

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